Why the Health Insurance Excise Tax Is a Bad Idea

Twenty years ago, 60,000 workers from New York City to Maine rallied against healthcare cost-shifting at the telecom giant then known as NYNEX (since “rebranded” as Verizon).

NYNEX was a very profitable, multinational company seeking to capitalize on a demoralizing decade of lost strikes, contract givebacks and widespread unionbusting. At a time when many workers were forced to make concessions, NYNEX strikers held the line for four months and emerged victorious. They successfully resisted the company’s demand that they pay hundreds and eventually thousands of dollars a year for medical benefits. But this singular union win didn’t come cheap. Customer service was disrupted by the work stoppage, resulting in tens of millions of dollars worth of lost wages. Hundreds of strikers were arrested, fired or suspended — and one, Gerry Horgan, was killed on a picket line in Westchester County.

In every other advanced industrial nation, the contentious issue of who pays for medical care was taken off the bargaining table long ago. And no worker would ever lose his or her life defending job-based private health insurance.

To this day, members of the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) who work at the phone company in the Northeast make no premium contributions for their individual or family coverage — an arrangement now enjoyed by a fraction of the labor force. To avoid being stigmatized as a privileged group — selfishly trying to preserve better-than-average benefits — the NYNEX strikers were careful about how they countered management’s demand for premium-sharing and framed the central issue in dispute. Their buttons, banners, press releases and leaflets made it clear that the solution to medical cost inflation was “Health Care For All, Not Health Cuts At NYNEX!”

Backed by allies like Jesse Jackson, Citizen Action and Physicians for a National Health Program (PNHP), the strike became a focal point for ongoing public and membership education about the need for Canadian-style national health insurance. CWA and IBEW took the position that givebacks in telecom wouldn’t benefit the millions of other workers with less insurance or none at all; in fact, any medical cost savings achieved by NYNEX would simply relieve financial pressure on that corporation and others to support real healthcare reform.

Not long after the walkout began, NYNEX provided strikers with a vivid reminder of why healthcare shouldn’t be controlled by employers: the company canceled coverage for all 60,000 employees and their families. Undeterred, NYNEX workers used strike benefits, contributions from other unions or personal savings to pay their doctor and hospital bills and, when necessary, arrange COBRA coverage. As part of the strike settlement, their old health insurance was restored and some costs reimbursed. However, a year later, when CWA tried to put a pro-single-payer resolution before NYNEX shareholders, management got the Securities and Exchange Commission to exclude the proposal from proxy materials sent out before its 1990 annual meeting.

In subsequent rounds of bargaining, the cost of providing generous benefits for active and retired Verizon workers has led to several more strikes and, in 2003, a protracted “work-to-rule” wrangle about the same issue. To this day, telecom executives remain staunch ideological foes of any expansion of the social wage in the form of “Medicare for all.” In its own corporate lobbying, Verizon props up a dysfunctional status quo — the current mishmash of public and private plans — while still objecting to picking up the tab for the latter. Just last month CWA had to file charges before the National Labor Relations Board against Verizon over its refusal to bargain over an announced change in HMO options.

Meanwhile, after twenty years of battling to keep fully paid insurance in place, telecom workers find their medical benefits back in the news — and much demonized — thanks to the tax on “Cadillac” health insurance favored by the Senate Finance Committee. In its current form, the proposed 40 percent excise tax would be applied, four years from now, to the portion of the value of any employer-provided coverage that then exceeds $8,000 for individuals and $21,000 for families. In the Boston area, where medical expenses are particularly high and Verizon’s workforce is getting older, the bill for family care is almost that much now. As CWA national president Larry Cohen pointed out in the New York Times on October 13, “at least half my members would be in health plans subject to the tax in 2013.”

As health policy expert Len Rodberg noted in a recent article, “Is There Any Way Out for Obama?”, quoted on the PNHP website, funding “healthcare reform” in this fashion simply penalizes employers like Verizon who have, under duress, continued to provide “good insurance.” At the same time, the Finance Committee bill approved on October 13 does little to compel better coverage by employers who currently underinsure their employees. In the case of big self-insured firms in the telecom industry, this is not a “tax on insurance companies” — as often reported misleadingly in the media. It’s an additional bottom-line cost that, as Rodberg observes, provides “a strong incentive to cut back on benefits.” Workers who lack collective bargaining rights will have their coverage reduced unilaterally. At unionized firms like Verizon or AT&T — where healthcare has bogged down union bargaining again this year — an excise tax on existing benefits will trigger more 1989-style labor-management conflict at a time when union strike capacity is far weaker than twenty years ago.

This is not what labor activists voted for last fall when they backed Barack Obama and the Democrats in key battleground states or the safer precincts of the Northeast. Because of the searing experience of the NYNEX strike, many of its participants became far more receptive to trading in their so-called Cadillac for the cradle-to-grave security of tax-supported universal coverage no longer tied to now-precarious telecom jobs. But no one wants to pay more for less — particularly when that’s far from the best or fairest route to “healthcare for all.” Senator Max Baucus’s misbegotten scheme to tax the benefits of workers who are slightly better off — so revenue can be raised for budget-busting private insurance subsidies — is, in fact, a lose-lose proposition. If it’s not killed on the Senate floor, or eliminated in a House-Senate conference committee, this undermining of past union gains will leave many embittered workers in its wake.

About Rand Wilson

About Steve Early

Steve Early is a former staff member of the Communications Workers of America, a union client of BerlinRosen. He belongs to the Richmond Progressive Alliance, a municipal reform group profiled in his new book, Refinery Town: Big Oil, Big Money, and the Remaking of An American City (Beacon Press, 2017). He can be reached at Lsupport [at] aol.com